Steel Scenario_Gouranga Sen
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Transcript of Steel Scenario_Gouranga Sen
India’s Steel Vision in Light of Current
Iron Ore Mining Mess
International Metal Summit
29-30 November 2012
1
Gouranga Sen Salva Report
COMMERCIAL IN CONFIDENCE
DISCLAIMER: All of the information contained in this presentation is to be considered confidential, and the recipient of this presentation agrees to retain the information in confidence and will not disclose any of the information to others except as expressly
permitted by Salva Report Pty Ltd. Only the recipient may rely upon this presentation .
This presentation is intended to provide general information only. Given that forecasts change on a daily basis, it is not intended to be completely accurate and should not be
relied upon as such. Salva Report Pty Ltd disclaims liability for loss incurred by any person acting in reliance upon the information contained in this presentation.
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0
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40
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60
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80
1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011
Crude Steel Production in India
Indian Steel: A Recent Growth Story
1948: New Industrial Policy
1952-70: Govt. built large ISPs Licensing of capacity
Dual Pricing System
Quantitative restrictions High tariff barriers
1976-1990: Slow economic
growth
1991: Economic Liberalization starts
Abolition of licensing for steel capacity expansion
1992: Deregulation of pricing & distribution of steel
Automatic approval of FDI up to 51%
5
Policy reforms were instrumental for the growth of Indian steel industry
Source: WSA, Salva Report
India: Riding on the Steel Ladder
6
0
100
200
300
Ch
ina
Jap
an
USA
Ru
ssia
S K
ore
a
Ge
rma
ny
Ukr
ain
e
Bra
zil
Ind
ia
Ital
y
Top 10 Steel Producers in World - 2004 (Mt)
0
150
300
450
600
750
Ch
ina
Jap
an
USA
Ind
ia
Ru
ssia
S K
ore
a
Ger
man
y
Ukr
ain
e
Bra
zil
Turk
ey
Top 10 Steel Producers in World - 2011 (Mt)
9th 4th
CAN WE ACHIEVE THESE? Source: WSA, Salva Report
India to become 2nd largest steel
producer
India to produce 180 Mt steel by
2020
India to require
~500 Mt iron ore by
2020
Karnataka – Symptomatic of the Malaise
7
Karnataka was formerly the second-largest iron ore producing state in India, producing 47Mt in 2008-09;
It previously accounted for 22% of India’s iron ore production;
In FY11-12, it’s production had fallen to 13Mt, and it now accounted for only 8% of India’s production;
It has dropped from the 2nd largest producing state to the 5th in 3 years;
Smaller steel mills in Karnataka running at 50-60% utilisation;
Results – 18% drop in production & 37% slump in exports of i/o in FY11-12
Other States Now Involved
8
Oct-11 Banned export of iron ore from dumps
Apr-12 Cancelled 460 iron ore traders’ licenses
Sep-12 Suspended all the 90 mining licenses in the state
Apr-12 Large number of mines suspended operations on mining irregularities
Sep-12 Sale and export of iron ore from captive mines banned
Jan-12 Directed NMDC to first meet state’s requirement before exporting
Mining of iron ore becoming more difficult in India daily
Goa
Orissa
Jharkhand
India
Nov-12 Imposed penalty of INR70,000 cr to 104 i/o mining lease holders
Iron Ore Mining in India: A Gloomy Situation
9
Ages of excess iron ore production is almost over Production halted/stopped in 3 of India’s 5 largest iron ore producing states Steel majors like JSW & Essar are resorting for iron ore imports All of this despite India having abundant iron ore resources!
Source: IBM, Salva Report
0
50
100
150
200
250
FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13*
Iron Ore Production & Consuption in India (Mt)
Iron Ore Mining Issues & Its Impacts
10 Source: CMIE
Company Location State Capacity (Mtpa)
Beekay Infraprojects Sagar Madhya Pradesh 0.7
Bramhani Industries Cuddapah Andhra Pradesh 2.0
Hospet Steels Ginigera Karnataka 1.0
Ind Synergy Gadchiroli Maharashtra 0.6
KIOCL Karnataka 1.5
Mineral Enterprises Hassan Karnataka 0.6
Narbheram Power & Steel Dhenkanal Orissa 0.6
Parwaz Sponge Iron Bellary Karnataka 0.1
Surya Vijaynagar Steel & Power Bagalkot Karnataka 5.0
Vir Sponge & Power Hassan Karnataka 0.1
Steel projects stalled/abandoned due to iron ore issues
Iron Ore Mining Issues & Its Impacts
11
Even after being the fourth largest producer, India is importing iron ore
Some of the recently concluded deals
Company Imported Material Import Source
Essar Steel Lumps South Africa
JSW Steel Lumps South Africa
Bhushan Steel Ltd Pellets Brazil
JSPL Pellets Brazil
Welspun Maxsteel Pellets Brazil
SAIL Pellets Bahrain
Source: Industry, Salva Report
Indian Iron Ore – Reserves & Resources
12
Source: IBM, Salva Report
Iron Ore Resources in India (Mt)
Haematite Magnetite
India has 28.5 Bt of i/o resources; out of which only 6 Bt is proved is reserves
Reserves mostly consist of high grade Haematite ore, mainly found in Orissa, Jharkhand & Chhattisgarh
Magnetite ore is found mainly in Karnataka, Andhra Pradesh and Goa
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1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Haematite Magnetite
Iron Ore Proved Reserves in India (Mt)
Proved Probable
How Long will Indian Iron Ore Last?
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5,000
10,000
15,000
20,000
25,000
30,000
0
400
800
1,200
1,600
2,000
20
10
20
13
20
16
20
19
20
22
20
25
20
28
20
31
20
34
20
37
20
40
20
43
20
46
20
49
Iron Ore Resources to Meet Production (Mt)
Iron Ore Production (LHS) Remaining Resources (RHS)
Current iron ore production - 150 Mt & consumption - 130 Mt
Present proved reserve will suffice only for 20 years for steel making!
Assuming production will be allowed to the extent of consumption, iron ore resources will last only for 40 years!
Source: Salva Report
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1,000
2,000
3,000
4,000
5,000
6,000
7,000
0
100
200
300
400
500
600
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
Iron Ore Reserves to Meet Production (Mt)
Iron Ore Production (LHS) Remaining Proved Reserves (RHS)
The Way Forward
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Utilize iron ore fines plied up as stock
Use more sinters & pellets instead of
lumps
Invest more on exploration
Clean up iron ore mining mess
Proper framework needs to
formulated for iron ore mining
business
Curb exports of iron ore
Source: Salva Report
A comprehensive approach needed to retain India’s competitive edge
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12
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Major Pellet Producers in India (Mt)
15
Iron ore availability as such should not derail India’s Steel
Vision. However, if the situation is not managed prudently
and quickly, accident is bound to occur
Thank You
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Gouranga Sen Jitendra RoyChoudhury Anustup Lahiri
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